Chapter 13 Quiz

All of the following types of plans are reserved for small employers EXCEPT: A. 401(k)s B. SARSEPs C. SIMPLE IRAs D. SIMPLE 401(k)s

ANSWER: A

Which of the following statements correctly describes the tax advantages of a qualified retirement plan? A. The time at which a worker meets the eligibility requirements for plan participation B. The age at which an employee must begin to make withdrawals from from retirement plans C. Earning of the plan are taxable to the employee voluntarily terminates participation in the plan D. Employer contributions are deductible business expenses when the employee receives benefits

ANSWER: B

All of the following employed persons who have no employer-sponsored retirement plan would be eligible to set up and contribute to a traditional IRA EXCEPT: A. Miriam, age 26, secretary B. Brent, age 40, medical technician C. Edna, age 72, nurse D. Jack, age 60, plumber

ANSWER: C

Bob, age 43, owns a traditional IRA and a Roth IRA. What is the maximum amount that he can contribute to both accounts in 2015 without being penalized? A. $2,000 B. $4,000 C. $5,000 D. $6,000

ANSWER: C

All of the following statements about SIMPLE plans are correct EXCEPT: A. an employer may establish a SIMPLE plans if another qualified plan is not already in place B. they can be structured as an IRA or as a 401(k) cash or deferred arrangement C. an employer must make a non-elective contribution of 2% of compensation on behalf of each eligible employee D. only employers with no more than 100 employees can establish SIMPLE plans

ANSWER: C

All of the following statements regarding Roth IRAs are true EXCEPT: A. they provide for tax-free accumulation of funds B. they limit contributions each year C. the mandate distributions no later than age 70 1/2 D. they are not available to those in the upper-income tax brackets

ANSWER: C

Which of the following scenarios pertaining to IRAs is not correct? A. June has accumulated $30,000 in her IRA. At age 52, she withdraws $2,500 to take a vacation. She will have to include the $2,500 in her taxable income for the year and pay a $250 penalty B. Bradley, age 72, is covered by an employer-sponsored retirement plan. He cannot establish a traditional IRA C. Peter inherits $15,000 in IRA benefits from his father, who died in 2008. Peter can set up an tax-favored rollover IRA with the money and defer current income tax on the benefits received D. Walter is age 60. He may take a distribution from his IRA without having to worry about an early withdrawal penalty.

ANSWER: C

All of the following should be eligible to establish a Keough retirement plan EXCEPT: A. a dentist in private practice B. partners in a furniture store C. a sole proprietorship of a jewelry store D. a major stockholder-employee in a family corporation

ANSWER: D

A distribution received from an employer-sponsored retirement plan or from an IRA is eligible for a tax-free rollover if it is reinvested in an IRA within how many days after the distribution? A. 20 B. 30 C. 45 D. 60

ANSWER: D

Herbert and Olga, both age 48, have been married for 10 years. They have no children, and each has a well-paying job. However, neither is covered by an employer retirement plan. What is the maximum amount they may set aside together in tax-deductible, traditional IRA funds in 2015? A. $4,000 B. $5,000 C. $8,000 D. $11,000

ANSWER: D

If David sets up a traditional IRA, what is the maximum contribution he can make and deduct from adjusted gross income for 2015? A. $1,000 B. $3,000 C. $4,000 D. $5,500

ANSWER: D

Which of the following phrases best describes vesting? A. The time at which a worker meets the eligibility requirements for plan participation B. The age at which an employee must begin to make withdrawals from retirement plans C. The right of a worker's spouse to be considered in retirement income needs D. The employee's right to funds or benefits, contributed by the employer, should the employee leave that employer

ANSWER: D

Which of the following statements about 401(k) plans is CORRECT? A. all of a company's employees must participate in the plan B. an employee's deferred contributions become non-forfeitible according to the plan's vesting schedule C. employer contributions are included in the employee's income for the year D. there is a limit on employee deferrals

ANSWER: D